Prevention necessary for reducing health care costs

When employers practice prevention with its employee population, health care costs can be reduced in as little as one year, especially among those with chronic illnesses, according to a recent study from StayWell Health Management and Towers Watson.

"This is one of the first multi-employer studies to explore the specific timing of changes in health care costs related to increases or decreases in health risks," says Jessica Grossmeier, vice president of research at StayWell Health Management and a co-author of the study. "The research supports a greater focus on prevention and wellness. It also can help employers better estimate the short-term financial impact of changes in individual and population health risks."

While earlier research has connected health risks with higher health care costs and improving health can lead to positive return on investment in the long term, few studies have focused on how soon cost savings become apparent along with the relative cost impact of health risk accumulation in opposition to health risk reduction.

"This research not only demonstrates the level of savings that can be expected, but it also begins to show how soon employers can expect to begin realizing some change in costs as a result of a change in health risk status," says Steven Nyce, senior economist at Towers Watson and lead author of the study. "This is crucial information for employers that have made a commitment to improving the health and productivity of their work force. It also should enable employers to attract more senior management support for investing in these programs."

Additionally, the study finds that an employer can pay for its wellness investment by the second year and hit a three-to-one return on investment by the third year. Each added health risk increases costs by 45 percent beyond any savings from eliminating a risk.

With factoring in differences regarding age, gender and company, employees with chronic conditions and added health risks experience twice the cost burden as opposed to those without chronic conditions, the study reveals. Cost savings are also four times higher among those with chronic conditions than those without chronic conditions. While a highest-cost group will always exist, continuing to center on prevention helps the whole population because it completely prevents chronic disease in some cases or slows the progression.

"The bottom line for employers is that if you start to change employee behaviors, you will start seeing health care cost savings very quickly,” Nyce says. “In fact, an employer can save an average of $100 in health care costs per employee per health risk eliminated in the year of the change and $105 per risk reduced in the year following the reduction. But if you don't keep healthy people healthy and employees start accumulating new health risks, you not only negate this savings but stand to add health care costs of $145 per employee per health risk added within just one year."

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